3:1 risk / reward. How do you personally use stops

Discussion in 'Strategy Development' started by TRADERCJ, Nov 16, 2006.

  1. TRADERCJ

    TRADERCJ

    When a stock I own goes positive, by .15 to .20, I move my stop to breakeven. Lately I have been getting stopped out alot. Do you wait for a stock to go up a certain % before moving your stop to breakeven, or do you "let it ride" and go for broke?

    Thanks
     
  2. Timeframe, please ! Daytrade, swing, position?
     
  3. TRADERCJ

    TRADERCJ

    Sorry, daytrading
     
  4. ddunbar

    ddunbar Guest

    You should let it ride or allow for a predetermined exit.

    When the stop was placed, it was done so with the thought of how much one is willing to lose. When the instrument moves in your favor, are you no longer willing to lose what you first assessed? The stop is there in case you are wrong.
     
  5. Well, the problem in daytrading is the noise. I have abandoned the 5 minutes chart to the 13 minutes, which gives less signals but has less noise. I do not use break-even anymore, I just use the initial protective stop and the target. For profitable trades, I try to capitalize on selling/covering strength/weakness. The fill is always poor when you sell because you have to.
     
  6. The market doesn't care a single bit about the price you paid for a stock. It's therefore completely illogical to put your stop at that level. It's also an illusion that you can somehow limit your risk to 0 and have an unlimited upside potential by placing a stop at that level.
     
  7. I agree that the market does not care about the break-even, but it does not care about the stops and targets either. We still need a structure to build our trading on. And I believe that trading is mainly psychology. So if, psychologically someone feels good about not letting a profitable trade go negative by being stopped out at break-even, it is good. It might not be the best trading tactic, but the best tradind tactic poorly traded because of some psychological characteristics, is even worse.
     
  8. Good question and great replies here.

    I like to get my stop moved and it's a double edged sword - if it moves in your direction quick, you are ok moving it. If it pudders around (noise) there's a good chance you get taken out and then get to watch it move in your direction. My feeling is that you need to do what is most comfortable to you and then just do it each and every time. Either accept that you may be ticked out but also protect yourself on quick snapbacks or let it go and deal with it.
     
  9. Agree. I missed to mention that earlier, but you nailed it: by structure I meant consistency (just do it and each and every time). A problem I had earlier was to analyze each trade and change my structure all the time. And of course, those changes were always too late, based on the last trades. So, find an edge, which is psychologically tradable, and be consistent with it, especially during the eventual drawdawn.
     
  10. use volatility stops
     
    #10     Nov 16, 2006